Tailoring Deposit and Loan Agreements with High Risk CRBs

Event Description

One of the often overlooked aspects of banking cannabis is tailoring your financial institution’s deposit and loan agreements. Please join Chris Van Dyck, attorney at Cogent Law Group, and expert on cannabis banking, as he discusses some of the critical clauses that need to be included in your financial institution’s agreements.

A financial institution’s deposit agreements should have specific clauses governing how and where deposits are to be made, who can make the deposits, restrictions on which types of accounts deposits are to be made, and what types of accounts cannabis businesses may not be eligible for. It is also prudent to include a condition that your cannabis customer use your financial institution as your primary depository institution. Furthermore, it is critical that your deposit agreement include a “bad boy” clause permitting your financial institution to terminate the relationship in the event the cannabis customer falls so significantly out of compliance that termination is the only option if your financial institution is going to fulfill its BSA obligations. Finally, ensure your jurisdiction and venue clauses are cannabis-friendly

Likewise, if your financial institution is considering lending to cannabis businesses, it is critical to include specific clauses to mitigate the risks, including the obligation on the part of the cannabis customer to remain in compliance with its state regulatory requirements, the right to call the loan in the event that the cannabis customer falls out of compliance, as well as restrictions on the types of collateral and how the collateral is to be used. Like your deposit agreements, it is important to ensure your jurisdiction and venue clause are cannabis-friendly.

Specific Areas Addressed

● Critical elements to include in cannabis deposit agreements

● Critical elements to include in cannabis loan agreements

● Regulation CC requirements and your financial institution’s cash-handling procedures

Takeaways

● The importance of including provisions in your agreements to mitigate your risks if thinking about cannabis financing

● The importance of including provisions in your deposit agreements in order to appropriately manage the deposit process

● The importance of including provisions in your deposit and loan agreements to ensure an appropriate return on your cannabis banking program.